@Value Hiker
Exactly right. Whether you are shorting or you are buying it is about risk/reward. If a company is fabulously overvalued and a lot of things have to go right to make it attain its valuation, that might be a good short.
But, but, if you have a fairly valued company (and Apple, with a forward P/E of 12, is by most measures fairly valued), to make money on the short, you would have to have a lot of things go wrong
This is not, for example, Yahoo in 1999 priced at a P/E of 100 or Cisco Systems priced at a P/E of 70. It is priced a P/E OF 12, a reasonable valuation for your average industiral company, let alone the most innovative, fastest growing technology compan y in the world.
Now, you could make a bet on Apple as a "macro bet" that the economy would weaken (for example, Apple went down a lot in 2008), but if the economy sours then there are a lot over overleveraged, overvalued companies that will go down a lot faster.
So, again, just don't understand this. I wouldn't short Apple in a hundred years.
Now Amazon.com, that is a different story. There is a stock that has been weak with a profit margin of 2% and a forward P/E of 70. Yes, 70. So if you put a gun to head and told me I had to short a fast-growing technology stock now I would short AMZN before AAPL.
Re: Gundlach
Broadway
3/11/2012 9:08:28 PM
Noreen, who wrote Forbes article? They still a journalist? Perhaps things should have gone badly for them ...
I am sure a lot of us wish we had invested when Apple stock hit $29.13 in 2000 LoL
People have been predicting the demise of Apple for a long time. Back in 2000, right after the company announced 4th quarter earnings would be "substantially below" Wall Street estimates and the value of Apple's stock fell from $53.50 to $29.13, Forbes ran a story titled Apple R.I.P.
From that story:
"The bloom is off the rose. The incredible run-up Apple stock has enjoyed since Steve's return is over, and the sheen of success that had enveloped the company has been tarnished. A temporary setback? Don't be too sure. Unlike, say, Hewlett-Packard, Apple has always been a company that deals poorly with failure. When things go bad at Apple, they go very bad."
And I guess when they go good, they go very good.
From valuation point of view, Apple shall not be considered a bubble. But Apple is on the consumer electronic market, which is traditionationally very volatile. I don't think Apple enjoys the kind of deep moat as IBM on mainframe, Intel on Microprocessor, or Cisco on router. Once Apple lose its ability of continuous innovation, the downfall will be vicious, just like what happened to Nokia and Rimm.
Shorting Apple at the right time will be richly rewarded. But finding the right time is the toughest part, for any short trade.
Shorting stocks is extremely difficult. Shorting great companies with relatively low P/Es is foolish.
With so many overvalued bad companies in the world, why would you try to short Apple? I just don't understand this one...
Re: Gundlach
Broadway
3/10/2012 8:23:22 PM
Gundlach might be on to something. Apple is due for a little Microsoft stagnation---if only because what goes up must eventually come down or at least go sideways for a while. It's a law of the cosmos and no one can avoid it, not even apple (especially not apple sans jobs).
I am a bit worried that the new iPad might have issues with the screen. I remember hearing that getting the screen at the iPad size was difficult and then it went into production rather quickly.
Has anyone else heard anything about the screens?
According to a tweet from CNBC's Jane Wells, bond king Jeffrey Gundlach of DoubleLine Capital said at Thursday night's CFA Forecast Dinner in San Diego, "one of my favorite generational shorts is Apple... the rainmaker is gone, and I don't see people lining up all night for iPad 482."
Does he know as much about stocks as bonds?
OK...how far in advance do we want to guess people will start lining up to get this iPad3 I mean New iPad? it goes on sale Friday.
Who wants to start the guessing?
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